When making an accounts receivable factoring decision, the factoring company typically focuses on the creditworthiness of your customers while banks will focus on your company’s financial history and cash flow. Factoring is not a loan and will not show up as debt on your company’s balance sheet. Factors can usually make a quick factoring decision, while banks may take weeks—even months—to approve a loan.
The reason many businesses use factoring is to ensure the continuous flow of cash to the business. Essentially, businesses who use factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.
Factoring Accounts Receivable Rates As Low As 1.5%
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